Barley Mowat 

Where the Money Goes

with 5 comments

Alright, so you’re starting a brewery. Congrats on being awesome. You’ve even managed to jump that next hurdle: financing. You’ve done all the normal steps: harassed friends, begged from the Bank of Mom and Dad, and kidnapped the children of a major financial firm’s loan officer. The deed is done, the money and credit are all lined up, and all it cost was little Jimmy’s toe.

Signing a lease, buying some brewing equipment, and hiring a brewer are really all that’s left between you and profitable, beery awesome-sauce (ProTip: You can avoid hiring a brewer by cloning an existing one).

Cue Graham With suddenly realizing why I’ve been asking him to spit in a petri dish recently.

After all that, though, things are clear sailing right? You can ring in your first growler sale, put that smiling John A MacDonald in the till, and finally start paying your staff, right? Wrong. Most brewery startups miss out on one little detail that seems frankly fairly idiotic: that money in the till? It’s the government’s; you’re just holding on to it for them for a bit.

What the what? Surely you must realize that beer sold in BC is subject to all sorts of mark-ups and taxes, right? What you probably don’t realize is exactly how those mark-ups and taxes are collected. Any sane, normal business, would sit down at the end of the day, do some math, and set aside the cash they owe to the rest of us to pay for things like roads, schools, and dubious senate expenses. It’s only fair.

Breweries, though, get a tough shake here. They aren’t trusted to do math, presumably because they’re corrupt, drunk, or both. Instead of simply remitting the ~$4 of that $10 growler owed to the government, they have to instead deposit the whole $10 into an account that the LCLB can withdraw from, which the LCLB then proceeds to do.

It get’s better. Instead of having the LCLB just take the ~$4 that is owed them, they instead straight up take the whole thing, process the taxes, and send out a cheque to the brewery for what’s left over. This process can take months, as in more than one. No, they don’t give you the interest on your money, what a silly question!

Pictured: Artist’s impression of LCLB tax/mark-up collection.

So, your struggling brewery that was depending on squeaky new income to, you know, pay salaries, buy malt and cover such trivial expenses as rent and hydro, now has to wait up to several additional months before seeing the first cent. This isn’t hypothetical. Some BC breweries in recent years spent years building their business only to almost go under immediately after opening because their revenue stream was delayed.

So, John Yap, while we’re talking about booze in grocery stores and beer at farmer’s markets, how about we also take a look at how the backend business of collecting tax on liquor is done, to allow these small brewery startups faster access to direly needed income?

In the meantime, brewery startups should add three or more months to their startup financing to account for this craziness. I’d hate to see you go under before Russian Imperial Stout season.

Written by chuck

November 22nd, 2013 at 11:30 am

Posted in Beer and You

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5 Responses to 'Where the Money Goes'

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  1. Thank you for highlighting this craziness. I propose a little black market homebrew popup/beer-truck market (commercial craft brewers welcome) in protest. Cut out the gov until they sort this out. If trouble comes, make hay with the media.

    Jeffery Young

    22 Nov 13 at 16:47

  2. I wish we could keep all our income and then pay the gov’t when they have successfully completed something.

    Coniferous Gloom

    23 Nov 13 at 00:43

  3. This is something that CAMRA discussed as a part of our meeting with John Yap and something I have brought up to the government officials on several occasions. It is a ridiculous burden on businesses. Imagine Safeway having to send in all the money they collect to the tax man so that the government could extract the PST-GST then send back the rest to Safeway.
    When I worked for Storm Brewing, I could never understand why I had to collect money directly from licensees and general public customers, only to send that money to the LDB so they could process paperwork and send us back our cut of the money that I had in my hands a weeks earlier.

    Paddy Treavor

    23 Nov 13 at 13:08

  4. That is crazy bullshit. Hard to believe how dumb the laws are!


    24 Nov 13 at 14:16

  5. and how about having to turn over all keg deposits, even if the brewery has already returned the deposit to the customer (which is often the case)?

    this really adds up and what the heck do keg deposits have to do with anything at the LDB?! all it does is tie up much-needed cash flow for breweries.

    and ps: kegs cost around $100 while the LDB mandates breweries can only charge a $30 refundable deposit. if kegs go awol – which they do – the brewery is out $70 and somebody has a nice keg for just $30.


    24 Nov 13 at 16:03

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